Management of Obligations to the Department

FY 2006 Performance and Accountability Report

Bureau of Resource Management

November 2006

Report

DEBT MANAGEMENT

Outstanding debt from non-Federal sources (net of allowances) decreased from $70.3 million in 2005 to $35.5 million in 2006. Refer to Notes to the Principal Financial Statements, Note 6, for an analysis of Accounts Receivable balances. Non-Federal receivables consist of debts owed to the International Boundary and Water Commission, and amounts owed for Repatriation Loans, medical costs, travel advances, proceeds from the sale of real property, and other miscellaneous receivables.

Of the delinquent receivables over 365 days old, $5.9 million is for the Repatriation Loan Program. These are loans given to destitute American citizens stranded overseas to allow them to return to the United States. The loans are given only if the individual cannot obtain funds from relatives, friends, employers, or another source. The Department acts as the lender of last resort. The loan becomes delinquent 60 days after repatriation to the United States. Due to their poor economic situation, most of these individuals are unable to repay the loans on time.

The Department uses installment agreements, salary offset, and restrictions on passports as tools to collect its receivables. It also receives collections through its cross-servicing agreement with the Department of the Treasury. In 1998, the Department entered into a cross-servicing agreement with the Department of the Treasury for collection of delinquent receivables. In accordance with the agreement and the Debt Collection Improvement Act of 1996 (Public Law 104-134), the Department referred $1,673,117 to Treasury for cross-servicing in 2006.

Receivables Referred to the Department of the Treasury for Cross-Servicing

FY 2006

FY 2005

FY 2004

Number of Accounts

1,044

638

253

Amounts Referred (In Thousands)

$1,673

$956

$261

FEDERAL CIVIL PENALTIES INFLATION ADJUSTMENT ACT

The Federal Civil Penalties Inflation Adjustment Act of 1990 established annual reporting requirements for civil monetary penalties assessed and collected by Federal agencies. Civil penalties are defined as any non-criminal penalty, fine or other sanction for which a given dollar amount or maximum amount is specified by Federal law, and which is assessed or enforced by an agency as a result of an administrative proceeding or civil action in the Federal courts. The Department has assessed fines on individuals and companies for exporting defense materials without required approvals and for misrepresenting facts on an export application.

Violating the express terms and conditions of the Department's munitions licenses and exporting defense services without a munitions license or other authorization to the People's Republic of China.

1/9/2002

$14,000,000

$2,200,000 initially, then $1,685,714 for seven subsequent years

$10,114,284

$—

$5,057,142(Chapter 11 BankruptcygrantedJanuary 2004)

$5,057,142

HUGHES ELECTRONICS CORP. & BOEING SATELLITE SYSTEMS

Violating the terms and conditions of the Department's munitions licenses and exporting defense services without munitions licenses or other authorizations (and conduct relating to two failed launches of rockets carrying spacecraft) to the People's Republic of China.

3/4/2003

$12,000,000

$1,500,000 for eight years

$5,000,000

$—

$3,500,000

$1,500,000

EDO CORPORATION

Violations incurred by Condor Systems, Inc. prior to the acquisition of business assets by EDO that included the terms and conditions of the Department's munitions license and exporting defense services without munitions license or other authorizations.

11/24/2003

$1,750,000

$583,334 initially, then $583,333 for two years

$583,333

$—

$583,333

$—

ITT CORPORATION

Exporting defense articles and services (night vision products and space remote sensing technical data and defense services) in violation of the terms or conditions of other approvals that were provided by the Department.

11/1/2004

$3,000,000

$1,000,000 initially, then $1,000,000 for two years

$2,000,000

$—

$1,000,000

$1,000,000

GENERAL MOTORS CORPORATION

Exporting defense articles and services (to foreign person employees of proscribed countries) in violation of the terms or conditions of other approvals that were provided by the Department.

11/1/2004

$8,000,000

$2,000,000 initially, then $1,500,000 for four years

$6,000,000

$—

$1,500,000

$4,500,000

ORBIT ADVANCEDTECHNOLOGIES INC.

Violating the terms and conditions of the Department's munitions and licenses by agreeing to sell defense articles (Radome Measurement System - AL8098/AL8099) to the People's Republic of China.

08/29/05

$500,000

$33,334 initially, then $33,333 over two years, then $200,000 over three years

$266,666

$—

$33,333

$233,333

THE BOEINGCOMPANY

Exporting unauthorized defense articles and services (to foreign person employees of proscribed countries) in violation of the terms and conditions of the Department's International Traffic in Arms Regulations (ITAR).

03/28/06

$15,000,000

$15,000,000 within 10 days for complete settlement

$—

$15,000,000

$15,000,000

$—

GOODRICHCORPORATION

Exporting unauthorized defense articles and services (to foreign person employees of proscribed countries) in violation of the terms and conditions of the Department's International Traffic in Arms Regulations (ITAR).

03/28/06

$1,250,000

$500,000 in 10 days, then $250,000 over three years

$—

$1,250,000

$500,000

$750,000

L-3 COMMUNICATIONS

Exporting unauthorized defense articles and services (to foreign person employees of proscribed countries) in violation of the terms and conditions of the Department's International Traffic in Arms Regulations (ITAR).

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